Just because the Fed raises interest rates, it doesn’t mean mortgage rates will follow suit. In fact, over the past couple months, the opposite has happened.
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With the Federal Reserve raising interest rates last December, how is this affecting current mortgage rates in our real estate market?
Whenever the Fed raises interest rates, people tend to assume mortgage rates will spike, but according to Brian Maier, mortgage broker and owner of Mortgage Box, there is no direct correlation between the Fed raising interest rates and the long-term future of mortgage rates.
When the Fed raised interest rates last December, that was the federal funds rate—not the mortgage rate. The federal funds rate is the rate at which banks lend to each other—not the consumer. Additionally, the Fed was very transparent about their intention to raise interest rates leading up to December, so by that time, mortgage rates had already adjusted.
"When the Fed raised interest rates last December, that was the federal funds rate—not the mortgage rate."
Mortgage rates peaked around early November, but since then, they’ve actually decreased by about 0.5%, which is huge. They’ll eventually rise again; it’s all a matter of when. In the meantime, though, there’s a lot of uncertainty in the market, which is helpful for mortgage rates. People are pulling money out of their stocks and putting it into bonds and mortgage-backed securities.
This presents a great buying opportunity right now because we don’t know how long they’re going to stay this low. On top of that, the spring market is on the horizon and home sales are starting to pick back up.
If you have any more questions for Brian about how interest rates are impacting our market, you can give him a call at (702) 432-5626 or email him at info@mortgagebox.com.
As always, if you have any more questions about real estate, don’t hesitate to reach out to me. I’d love to help you.